My car has been repossessed, and I was told it will be sold. What can I do?

Answer: Your rights after repossession vary depending on your state law.

In some states there are laws granting a right to reinstate after repossession. These laws usually provide for a time period after repossession in which you can get your vehicle back by making up any existing overdue payments and the cost of repossession.

If you don’t reinstate the loan or you live in a state where there is not a right to reinstate,  your  lender can either keep the vehicle as compensation for your debt or sell it at a private or public sale. For a public sale the lender must notify you of the date, time, and place of the sale so you can have a chance to bid on the vehicle. For a private sale the lender must notify you of the time after which the vehicle may be sold. In either a public or private sale, you may be entitled to buy back the vehicle by paying the full loan amount plus the repossession costs before the sale.

Deficiency balance.  If your vehicle is repossessed and sold, you may be responsible for paying the difference between the amount left on your loan (plus repossession fees) and the sale price. This is known as a “deficiency balance”. For example, if you owe $10,000 on the vehicle and your creditor sells it in a commercially reasonable manner and gets $7,500, then the deficiency is $2,500 plus any other fees you owe. If you don’t pay the deficiency, the lender may hire a debt collector to attempt to collect the debt. The lender may also file a lawsuit in court against you to collect the deficiency. If the lender obtains a judgment from the court, the lender can garnish your wages and take other steps to collect the judgment. If there is a surplus of funds after your lender has applied the sale proceeds to your balance then you are entitled to those funds. You should make sure you know what the vehicle sold for and consult an attorney if you think the price was unreasonable.                                                                                                                                    

Repossession costs. You will likely be charged for the cost of repossession. However, the fees for repossession must be reasonable. Reasonableness is ultimately determined by a court and will depend on the type of vehicle taken, how it was taken, and where it was taken. You should ask your lender for an accounting of the repossession costs.

You may have other rights and obligations under your state law. You may be able to get more information about your state law from your state attorney general, a state consumer protection office, consulting with a private attorney or your local legal services office.

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